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Policy Update: Johnson Amendment

Publication date: 
March, 2017

The Forum of Regional Associations of Grantmakers supports the continued full enforcement of current law that prohibits 501(c)(3) charitable organizations from endorsing, opposing or contributing to political candidates and engaging in partisan campaign activities—also known as the “Johnson Amendment.” We are troubled by recent proposals in Washington to weaken or repeal this longstanding protection in the federal tax code.

Where We Stand

Read the Forum’s Full Statement on the Johnson Amendment and news release.

Community Letter in Support of Nonpartisanship

Join the Forum in signing the Community Letter in Support of Nonpartisanship to present a united front to preserve the protections in the current law. Forum members who have signed the letter to date include:

  • Arizona Grantmakers Forum
  • Associated Grant Makers
  • Colorado Association of Funders
  • Connecticut Council for Philanthropy
  • Council of Michigan Foundations
  • Council of New Jersey Grantmakers
  • Florida Philanthropic Network
  • Forefront (IL)
  • Grantmakers Concerned with Immigrants and Refugees
  • Grantmakers for Effective Organizations
  • Grantmakers of Oregon and Southwest Washington
  • Iowa Council of Foundations
  • Kansas Association of Community Foundations
  • League of California Community Foundations
  • Minnesota Council on Foundations
  • New Mexico Association of Grantmakers
  • PEAK Grantmaking
  • Philanthropy California (a joint initiative of Northern California Grantmakers, San Diego Grantmakers, and Southern California Grantmakers)
  • Philanthropy for Active Civic Engagement
  • Philanthropy New York
  • Philanthropy Northwest
  • Philanthropy Ohio
  • Philanthropy Southwest
  • Philanthropy West Virginia
  • Washington Regional Association of Grantmakers
What It Means for the Philanthropic Sector

According to the Council on Foundations, if the Johnson Amendment were repealed, 501(c)(3) organizations could become entities that are given tax-deductible donations for the purpose of participating in the electoral process, and donors would be completely shielded from disclosure—hindering transparency. Because donors could deduct any contributions, as well as shield their donations from disclosure, it would create an incentive for people to switch from giving money to PACs and super PACs (which are required to identify their donors) to 501(c)(3)s.

501(c)(3)s would be able to participate in influencing elections without disclosing their donors as long as “no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation.” (NOTE: some estimates would limit this number to 10-20% of their budgets, while others have argued that as long as less than half of an organization’s budget was used for political activity, that would satisfy the “no substantial part” test—but the IRS has never defined this or assigned a percentage). Effectively, this would completely open the door to endorsing or opposing specific political candidates, while still maintaining restrictions for charities to lobby on behalf of issues and legislation.

As some 501(c)(3) organizations spend millions, and even billions, of dollars every year, this could result in exorbitant amounts of dollars being used to influence the electoral process without American taxpayers being able to scrutinize which parties are behind the contributions.

Furthermore, private foundation CEOs, staffs and boards could find themselves feeling pressured to not only endorse political candidates at local, state and federal levels but to support them financially, draining resources that would otherwise be going to charitable purposes.

Private Foundation Self-Defense Exception

According to a determination by the Council on Foundations, it is legally permissible for private foundations to lobby on legislation related to the Johnson Amendment, under the self-defense exception. Private foundations are barred by law from lobbying with a few exceptions, and one such exception is the self-defense exception. As described by the Alliance for Justice, the self-defense exception allows a private foundation to communicate with legislators to express an opinion about any legislation that “could affect the organization’s existence, powers, duties, tax-exempt status, or the deductibility of contributions to the organization.” It is the Council on Foundations’ position that any proposed legislation that would repeal or modify the Johnson Amendment would directly affect the powers and duties of a private foundation or other exempt organization.

Background

As noted by the Alliance for Justice, the Johnson Amendment, named after Lyndon B. Johnson, was a 1954 amendment to the tax code. It prohibits 501(c)(3) tax-exempt organizations from participating in political campaigns (specifically, supporting or opposing a candidate). The purpose of the rule was to prevent tax-deductible money from being used to support or oppose candidates for public office. The Johnson Amendment does not prohibit all electoral activity, and 501(c)(3) organizations may still actively participate in the election process.

As background, then-Senator Lyndon Johnson introduced the amendment, purportedly motivated by activities of charities allied to one of his opponents during his 1954 primary election. A charitable organization formed in opposition to the New Deal, the Committee for Constitutional Government, launched a campaign that suggested that a vote for the incumbent (Johnson) was a vote for socialism in Washington. The campaign, which was both unusual and initially a threat to Johnson, resulted in Johnson questioning the legality of the committee’s actions. Upon learning that those actions were legal, Johnson introduced the amendment on July 2, 1954. The amendment was enacted without any committee hearings or floor discussion.

According to Tax Notes, published by the nonpartisan, nonprofit Tax Analysts organization, the Johnson Amendment was part of a much larger debate going on in the country at the time about charities and their political activity. Two years before the Johnson Amendment was introduced, the House established a panel to investigate whether charities were "using their resources for purposes other than the purposes for which they were established," with a special focus on political activity. Two years later, the House convened a follow-up panel, known as the Reece Committee. In its final conclusions, made almost simultaneously with Johnson's amendment, the committee advocated for "the complete exclusion of political activity" regarding charities. "We cannot see any reason why any public funds should be used when any political impact may result," the committee wrote.

Bills in the 115th Congress

Three bills introduced in the 115th Congress would adversely affect the Johnson Amendment:

  • H.R. 172, introduced by Rep. Walter Jones (R-NC), would completely repeal the Johnson Amendment. There would be few restrictions on 501(c)(3) organizations using money to support political campaigns, and they would be able to shield donors from transparency.
     
  • H.R. 781 and S. 264, identical bills introduced by Rep. Steve Scalise (R-LA) and Sen. Jim Lankford (R-OK), would seek to create a “carve-out” for 501(c)(3) organizations to speak about the political process. However, in the current landscape after Citizens United, where political spending is a form of protected speech under the First Amendment, these bills could pave the way for additional money to flow from charities into electoral activity and could leave the sector just as vulnerable to abuse and corruption as a complete repeal of the Johnson Amendment.
Potential Executive Actions

Eliminating the Johnson Amendment was a campaign promise made by President Trump, and he has continued to discuss doing so since he took office. At the National Prayer Breakfast on February 2, for example, President Trump vowed to “totally destroy” the Johnson Amendment. A way for the president to do so would be to issue an Executive Order (EO). A leaked draft of a new EO that would focus on religious freedom contained language that would essentially overturn the Johnson Amendment (NOTE: the White House has since walked back the leaked draft of the EO, saying that they may not issue it, but did not deny that the draft was authentic, per the Council on Foundations).

Colleague Perspectives

Read the perspectives of the Forum’s colleague organizations on this issue:

Resources
 

This page includes information provided by the Alliance for Justice, Council on Foundations, Independent Sector and National Council of Nonprofits.